The Chief Executive Officer of Deutsche Bank AG, John Cryan scrapped his own plan for a turnaround admitting that this seventeen month old effort didn’t pan out.
The executives of Germany’s largest bank approved measures late Sunday to restart one of the most turbulent transformations in history. Most importantly, measures include their plans to raise 8.5 billion dollars in the sale of shares. Some more moves are naming deputy CEOs who would be succeeding Cryan later, abandoning consumer banking unit sale, and selling some part of their asset management business. The sale of the consumer banking unit was previously the linchpin in the blueprint of Cryan’s plans.
On a conference call on Sunday, the CEO noted that the installation of deputy CEOs was his idea. It has been about two years since he took over and Deutsche Bank is yet to plot a profitable future course all the while seeking elimination of 9000 jobs.
Although the bank has been accused of capital infusion for four times since 2010, the investors welcomed these developments just to end the questions arising on the financial strength of the firm. The bank is thinking of raising about 2.1 billion dollars or 2 billion euros of capital by unloading some assets and selling a minority stake in their asset management unit over the coming two years.
The previous three capital increases of the bank raise 21.7 billion euros in total (about 26.4 billion euros in current market value). Even after this, the stock is lower than when Cryan became CEO by about 29%.
The company said on Sunday that an integration of the Postbank consumer division is also planned by Deutsche Bank and the bank also aims to reduce the costs to 22 Billion Euros in next two years. The CFO, Marcus Schenck, and Head of Oversees Consumer Banking and Wealth Management, Christian Sewing would be the deputy CEOs and the bank would find a new CFO soon.
The Frankfurt-based lender has doubled its market value from the September low even after posting net losses of 8 billion euros in the past two years, which makes this capital increase a lot more attractive. The fourth largest shareholder changed last month to a Chinese conglomerate led by Chen Feng, the aviation tycoon by taking a stake of 3.04%.
A lot of investment banks have gained from the victory of Donald Trump in the presidential election held in November as their shares have climbed due to the investors betting that regulations will be eased and interest rates would drive up to spur growth. This may help Deutsche Bank raise capital and end concerns.
The bank plans a minimum dividend per share of 0.11 euros and a payout ratio, which is competitive in the beginning of fiscal 2018. This would reverse the decision of Cryan to scrap the dividend of the bank for the first time in sixty years.